Bank of England says UK economy headed for prolonged recession

The Bank of England has warned that the UK economy is entering a prolonged recession as it raises interest rates to fight inflation amid fears that inflation will hit 13% or 15% by the end of the year.

The Bank of England raised interest rates to 1.75% on Thursday, the highest level since the 2008 financial crisis. The central bank raised interest rates to ease an expected rise in inflation, which is now expected to hit 13.3 percent this year, a 40-year high.

It’s now expected By the end of the year, the UK economy will be in recession for at least five quarters, defined as two consecutive quarters of negative growth.

The World Bank has warned that the recession will not only make the economy smaller than it was before the coronavirus crisis in China, but it will also lose 900,000 jobs by 2025, and the economic crisis is expected to have a huge impact on wages.

Real household income is projected to fall by the most since records began in 1963, falling 1.5% this year and 2.25% in 2023, according to the forecast.

Bank of England Governor Andrew Bailey announces rate hike Say: “I recognise the significant impact this will have and how difficult the cost of living challenge will continue to be for households. Inflation hits the poorest hardest.

“It will get worse if we don’t get inflation on target.”

Still, the central bank said it doesn’t expect inflation to return to its 2 percent target until 2025.

Brexit leader Nigel Farage comments on banks’ performance Say: “The Bank of England has completely let us down. They didn’t see high inflation coming. Then they told us it was ‘temporary’. Now they say it’s going to last for years and it’s going to be 13%.

“They’re so bad, they make politicians look good!”

While the Bank of England forecasts inflation to hit 13.3%, other bodies, including the Resolution Foundation, have warned it will climb even higher, with the think tank claiming it could hit 15% early next year.

Inflation started last summer after lockdowns began to be lifted, however, continued inflation is largely due to the spiraling energy crisis. Analysts are now warning that Britain’s energy bills could rise to £4,200 in January following another increase in the energy cap, a socialist system in Britain supposedly designed to keep energy prices low for lower-middle-class households.

Jack Leslie, senior economist at the Resolution Foundation, said: “The outlook for inflation is highly uncertain, driven largely by unpredictable petrol prices, but changes in recent months suggest that the Bank of England may be forecasting a higher and later rate of inflation. Peak. Inflation – could be as high as 15% by early 2023.”

Follow Kurt Zindulka on Twitter @KurtZindulka

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